Yellen warned that climate change could cause asset prices to fall, harming the US economy

By Andrea Shalal

WASHINGTON (Reuters) – Climate change is already having a major economic and financial impact on the United States and could cause asset price losses in the coming years that could cascade through the U.S. financial system, Treasury Secretary Janet Yellen will warn on Tuesday.

Yellen will tell a new advisory board of academics, private sector experts and nonprofits that the annual number of billion-dollar disasters has increased fivefold over the past five years compared to the 1980s, even after taking into account. Inflation

“As climate change intensifies, natural disasters and warming could lead to asset price declines that could cascade through the financial system. And a delayed and chaotic transition to a net-zero economy could shock the financial system as well.” He said in comments prepared for distribution at the first meeting of the advisory board.

Severe storms and wildfires in states like California, Florida and Louisiana, tornadoes across the South and severe storms on the West Coast show how climate change is accelerating, he said.

The U.S. government reported in January that 2022 tied 2017 and 2011 for the third-highest number of billion-dollar disasters, with a total cost of at least $165 billion.

There were 18 weather and climate disasters that cost at least $1 billion each year, including two tornado outbreaks in the South and Southeast in March and April and massive wildfires across the West.

Yellen said the new Climate-Related Financial Risks Advisory Committee, formed last October by the Financial Stability Oversight Council (FSOC), will boost US efforts to mitigate the risks that climate change poses to financial stability.

The meeting comes amid several new rules on climate-related risk management issued by the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, after FSOC, the US’s top regulatory panel. October 2021 first identifies climate change as an “emerging threat” to US financial stability.

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The Federal Insurance Office also issued a proposal to collect data from insurers to assess climate risk, and the Fed said in January it would conduct a pilot climate scenario analysis to study banks’ climate risk-management practices.

And in April the US Securities and Exchange Commission will release a new rule on companies’ climate-related disclosures.

But the Biden administration is facing stiff challenges from Republicans, who say the agencies wrote the rules outside of the legal process. Republican leaders want to use their slim control of the U.S. House of Representatives to limit executive oversight of climate rules and other issues.

Yellen said climate-related events have already prompted insurers to raise rates or stop providing insurance in high-risk areas, which could have devastating consequences for homeowners and their property values. This could instead spill over into other parts of the financial system, he said.

(Reporting by Andrea Shalal; Editing by Stephen Coates)